ESCANABA – Escanaba city council heard a report on the city’s investments and a warning about impending inflation at the city council meeting on Thursday.

“If there’s one thing that worries me about investing, it’s inflation,” Bob Valentine, vice president of institutional investment services at First Bank and former treasurer of the city of Escanaba, told the board.

Mainly, Valentine blamed the policies created by the Federal Reserve at the height of the COVID-19 pandemic.

“Our Federal Reserve has, in a sense, rewritten all traditional economic texts in a way that makes it practical or excusable to dramatically increase our money supply, and in doing so, they’ve created an environment that I at least feel, and our investment, the group thinks, is conducive to the runaway inflation that we saw in the 1970s – late 1970s and early 1980s ”, he said.

Valentine explained that while many may watch investment returns, it is more important to watch “Real returns”, the total gain or loss once the cost of inflation has been factored in. However, it is difficult to assess the current inflationary climate as the calculations used to report the inflation rate have changed over the years and there has been a significant expansion in supply.

The main objective of the city’s investment is to create capital for the city’s operations. Over the past 18 months, the city has withdrawn about $ 1.84 million from its investment accounts, increasing its starting balance from $ 28 million to a total value of about $ 27.2 million.

Market appreciation played a large role in the total value of the portfolio, dropping $ 357,465 in value just over the past six months. This decline in market appreciation, however, does not give a complete picture of the portfolio, which has appreciated by $ 592,839 over the past 18 months. During the same 18 month period, the city earned $ 421,779.82 in revenue.

“Nobody’s crystal ball is very clear here and I think all the markets are watching this and have expectations, I think the only thing that is given is the volatility that is going forward. the only place where you can really bet and know that you are going to win is in volatility ”, he said.

While much of the conversation between Valentine and the board revolved around differences in Keynesian and monetarist economic policy – as well as a disagreement between Blasier and Valentine over the role of the Federal Reserve in creating money – the board shared Valentine’s concerns about inflation.

Blasier suggested that the city invest in physical assets, such as gold and silver, as a hedge against inflation. While Valentine agreed that owning such assets was smart for small investments, it just wasn’t possible for the city.

“In other client portfolios the answer is absolutely yes, in the city wallet it is unfortunately illegal to enter these. Valentin explained.

Concerns were also expressed that a number of assets held in the city’s portfolio would expire in 2022. When that happens, the city would most likely reinvest at least some of those funds in the market. and yields are currently at historically low levels.

“There are always worries when you have large sums of money coming up. At the same time, we hope that there will be some improvement in performance ”, said Valentin.

Following the presentation, the council approved the city’s investment policy, which remained unchanged, and the list of city institutions that were eligible custodians, which changed slightly due to a potential merger and d ‘a name change.

In other matters, council approved the purchase of new turbidimeters for the city’s water utility at a cost not exceeding $ 31,350. Meters measure the amount of dirt in the water.

The council also met behind closed doors to discuss the city attorney’s opinion on a settlement issue.